By Kakia Papadopoulou
The stock market sends its vote of confidence to Public Power Corp or PPC’s new chief executive officer Panayiotis Athanasopoulos, with the stock extending Wednesday’s sharp gains-when the official announcement was made-on Thursday.
The state’s choice of Panayiotis Athanasopoulos- a successful academic and manager in leading foreign firms- at PPC’s helm is a clear sign that even on a longer term, the state sees a severe restructuring of the country’s main electricity producer as the only solution to turn the company competitive in the light of the full energy market deregulation.
“Athanasopoulos has a really difficult mission in PPC,” says analyst with the International Bank of Greece. “However, we are almost convinced that a successful manager like Athanasopoulos wouldn’t go to a company with PPC’s current problems unless he had received some sort of assurances that he will be able to proceed with a serious restructuring, even after the elections. ” she added.
For many international brokerages PPC is the last restructuring play in the utilities across Europe which still remains on hold.
Credit Suisse First Boston in a report titled “Unfulfilled promise” slashed last week Public Power Corp’s rating to neutral from outperform, setting the end-2007 price target at EUR21.3 versus EUR24.3 at end-2006.
The reasoning behind the downgrade is “the political influence in regulation and management which could outweigh the positive impact of persistently low oil prices,” the broker said.
Surely the recent chief executive officer’s resignation-it was the third consecutive departure of top ranking official in PPC the last two years- showed the company’s vulnerable position.
PPC experienced one of its worst years in terms of profitability in 2006. Analysts see a more than 40% drop in net profits last year, due to be announced late February.
Persistent calls for higher tariff increases to counterbalance the increasing cost of energy, given the sharp rise in oil prices last year, were in vain.
PPC’s spending in oil and natural gas rose from EUR547 million in the first three quarters of 2004 to EUR921 million during the same period in 2006, a rise of 68%.
On top of the higher fuel costs, the company saw in the first nine-months of the year, a 9% rise in its personnel costs.
Although PPC is heavily overstaffed, with its headcount amounting to 26,500 at the end of September, the company called a tender recently for some 2,030 new hirings. PPC’s overall needs do not justify more than 20,000 employees, analysts reckon.
Amid the highest unemployment rates within the eurozone, around 10% and the increasing possibility of early government elections, the government follows its old tactics- promising jobs to voters in exchange of votes in the upcoming elections. Commentators see elections in the fall this year.
Alpha Finance see as main points priorities of PPC’s restructuring plan tariff rebalancing and early retirement schemes to reduce its headcount.
But analysts do not expect spectacular moves until the elections. “The changes that are needed in PPC involve high political cost, and the question is how prepared is the government to pay it now?” said IBG analyst.
Still Athanasopoulos’ appointment revived expectations and drove the stock 3.5% higher on Wednesday to add some 0.6% in early trade on Thursday.